Income Tax Appellate Tribunal - Indore
Rajgarh Liquors vs The Commissioner Of Income-Tax on 7 February, 2003
Equivalent citations: [2004]89ITD84(INDORE), (2004)85TTJ(INDORE)281
ORDER
T.R. Sood, AM
1. In this appeal, assessee has challenged the impugned order passed Under Section 263 by the Commissioner of Income-Tax, Ujjain. The brief facts of the case are that a return was filed declaring income of Rs. 2630937/- on 30.11.99 which was processed Under Section 143(1)(a) of the Act on 31.3.2000. Upon examination of records, Ld. CIT found that auditors in their audit report Under Section 44AB had commented that sales vouchers were not available with assessee and sales-tax department had levied penalty of Rs. 18125/-. It was further found that assessee had declared turn over of Rs. 59353524/- on which net profit of per profit and loss account was Rs. 2563882/- which was against decision of jurisdictional High Court in the case of Badri Prasad Bhagwandas & Co. v. CIT 82 Taxman 109 in which it was held that if proper books were not maintained by a liquor contractor then profit should be assessed at 5% of sales and sales were to be estimated at 2 1/2 times of the licence fee. In this case, as the licence fee was Rs. 29686455/- and 2 1/2 times thereof i.e. sales would work out to Rs. 74216137/- and net profit @ 5% of such sales would be Rs. 3710807/- as against Rs. 2563882/- shown by the assessee. Ld.CIT was of the opinion that in this case AO was required to make assessment after conducting proper enquiries after issue of notice Under Section 142(1)/143(2) because auditors had themselves commented that sales vouchers were not properly maintained and sales were not verifiable. Notice Under Section 263 was issued and in compliance it was submitted that in this case no assessment order has been passed and intimation issued Under Section 143(1) was not an assessment order. It was contended that Section 263 is not applicable to intimation issued Under Section 143(1). Ld. CIT did not agree and was of the view that powers Under Section 263 were wide enough to cover any proceedings under the I.T. Act. Therefore, order Under Section 143(1)(a) was found to be erroneous in so far as it was prejudicial to the interests of revenue and AO was directed to pass fresh assessment order Under Section 143(3)/144 of the Act.
2. Before us, Ld.AR brought to our attention provisions of Section 143 and submitted that w.e.f. 1.6.99 no adjustments are permitted to be made and only tax or interest has to be calculated and credit for TDS and advance tax has to be allowed and if there is any demand or refund then an intimation is required to be issued otherwise acknowledgement itself would be deemed to be an intimation. Then he referred to page 1 of the compilation which is copy of the intimation in which no adjustments have been made by the A.O. then he referred to page 2 & 3 which is copy of the notice Under Section 263 and reasons for the same. He submitted that these reasons are not correct. He contended that if AO was not satisfied with the return, he could have easily issued notice Under Section 143(2) but once he chooses not to issue notice Under Section 143(2) then nothing can be done. He further contended that proviso to Section 143(2) makes it very clear that notice Under Section 143(2) can be served on the assessee only within a period of 12 months from the end of the month in which return is furnished. As the return was filed on 30.11.99, notice could have been issued till 30.11.2000 and notice cannot be issued by resorting to provisions of Section 263. By no stretch of imagination, provisions of Section 263 can lift the time limit provided in proviso to Section 143(2) for the purpose of issuing notice. On merits, he submitted that in Badri Prasad Bhagwandas & Co. v. CIT (supra) the issue involved was whether licence money could be used for determination of sales or not and issue was not application of flat rate of net profit of 5% in case of liquor contractor. He contended that in many cases, this Bench of the Tribunal has held that estimation of sales at 2 times of licence fee is also justified. He particularly referred to decision in case of Shivdayal Purshottamdas v. ITO in ITA No. 358/Ind/91, copy of which has been filed at page 10 to 12. He particularly referred to para 4 of this order.
3. On the other hand, Ld.DR submitted that intimation issued Under Section 143(1) is also an order within the meaning of Section 263(1) because language used in Section 263(1) makes it clear that any order passed in any proceedings is open to revision. He contended that Section 263 conferrs wide powers on the Commissioner and if proper enquiries are not conducted by AO then such orders would become erroneous and prejudicial to the interests of revenue. He relied on Rampyaridevi Sarohi v. CIT, 67 ITR 84, Smt. Taradevi Agrawal V. CIT, 88 ITR 323 and Malabar Industrial Co. v. CIT, 198 ItR 611. He further submitted that the auditor's report clearly indicated that sales were not fully vouched & AO should have not ignored this fact which was on record. He contended that principle regarding application of net profit rate in case of liquor contractor was also available in the form of judgment from jurisdictional High Court in the case of Badri Prasad & Co. v. CIT (supra).
4. In the rejoinder, the Ld.AR submitted that it is discretion of AO to select a particular case for scrutiny or not as pointed out by him, lower rates of profit were also held to be justified by the Tribunal in other cases so AO was merely following the decision of the Tribunal and in such a case action of the AO could not be made subject to revision. In this regard, he relied on Russell Properties Pvt. Ltd. v. Addl. CIT, 109 ITR 229.
5. We have considered the rival submissions carefully. We have also gone through the relevant material on record and the judgments relied on by the parties. Though we do not agree with Ld.AR that intimation Under Section 143(1) is not an order as envisaged Under Section 263 because language of Section 263 is very comprehensive and of wide amplitude where Commissioner is empowered to call for the record of any proceedings for examination under this Act and intimation Under Section 143(1) is definitely a proceeding under the Act. At the same time, it is trite law that any order can be revised only if the order is erroneous inasmuch as it is prejudicial to the interests of revenue. This means that before revision, Commissioner shall find some error in the order which shall be in the nature of prejudicial to the interests of revenue. In the instant case, only intimation has been issued after 1.6.99 after which date there is no power to make any prima facie adjustment, thus this order cannot be called erroneous. The Ld. CIT has directed in the last para of his order to re-frame assessment Under Section 143(3)/144. Once a return is filed, AO has full discretion to select a case for scrutiny and issue notice Under Section 143(2). It is common knowledge that cases are selected for scrutiny on the basis of guidelines issued by the higher authorities from year to year. Further, any case can be taken up for scrutiny only within the period of one year from the end of month in which return has been filed as becomes clear from the language of proviso to Section 143(2), which reads as under:-
"Provided that no notice under this sub-sec. shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished."
Though law prescribing limitation is only procedural law but when a proceeding becomes time barred by the limitation then this would vest in a party with substantive right which accrues to such party because of the limitation. In this case, since no notice was issued Under Section 143(2) within the prescribed time limit a substantive right of not being put to scrutiny can be said to have accrued to the assessee. This right cannot be snatched by resorting to provisions of Section 263. Otherwise also it is settled position of law that a thing which cannot be achieved through direct application of a provision cannot be sought to be achieved though indirect measures. In these circumstances, we quash the order of Ld. CIT.
6. In the result, appeal is allowed.